Picture Imperfect: Attempted Regulation of the Art Market
Total Page:16
File Type:pdf, Size:1020Kb
William & Mary Law Review Volume 29 (1987-1988) Issue 3 Article 3 April 1988 Picture Imperfect: Attempted Regulation of the Art Market Patty Gerstenblith Follow this and additional works at: https://scholarship.law.wm.edu/wmlr Part of the Entertainment, Arts, and Sports Law Commons Repository Citation Patty Gerstenblith, Picture Imperfect: Attempted Regulation of the Art Market, 29 Wm. & Mary L. Rev. 501 (1988), https://scholarship.law.wm.edu/wmlr/vol29/iss3/3 Copyright c 1988 by the authors. This article is brought to you by the William & Mary Law School Scholarship Repository. https://scholarship.law.wm.edu/wmlr PICTURE IMPERFECT: ATTEMPTED REGULATION OF THE ART MARKET PATTY GERSTENBLITH* I. INTRODUCTION In June 1984, the leading auction house of Sotheby Parke-Ber- net sold a collection of 59 valuable and rare Jewish books and manuscripts. The state of New York subsequently prosecuted Sotheby's for misrepresentation and fraud in the conduct of this sale, claiming that the true ownership of the collection was in doubt and that Sotheby's had not revealed the questionable state of the title to prospective purchasers.' A year later the parties set- tled this suit by rescinding the sales and redistributing the auc- tioned items without any finding of liability or fault.2 At about the same time that the suit against Sotheby's was set- tled, it was revealed that the chairman of another leading auction house, Christie's, had falsely reported the sale of two Impressionist paintings at an auction held in 1981. As a result of this revelation and in keeping with a settlement reached with the New York De- * Assistant Professor of Law, DePaul University College of Law; A.B., Bryn Mawr Col- lege, 1971; Ph.D., Harvard University, 1977; J.D., Northwestern University School of Law, 1983. I want to express my appreciation to Professor Marshall Shapo of Northwestern Uni- versity School of Law and Professor Wayne Lewis of DePaul University College of Law for their helpful criticisms and suggestions and to acknowledge the support of the DePaul Uni- versity College of Law Summer Research Grant program. I also want to thank Joyce Klouda for her assistance in preparing this article. 1. Abrams v. Sotheby Parke-Bernet, Inc., No. 42255-84, slip op. at 2-5 (N.Y. Sup. Ct. Aug. 24, 1984) (granting motion for preliminary injunction). The Attorney General for the state of New York obtained an order requiring Sotheby's to retain the proceeds of the auction to the credit of the lawsuit and to retain any portions of the collection not already turned over to the purchasers. Id., slip op. at 10. 2. Stipulation and Order of Settlement, Abrams v. Sotheby Parke-Bernet, Inc., No. 42255-84 (N.Y. Sup. Ct. July 16, 1985); McGill, Sotheby's To Recall Hebrew Books It Sold, N.Y. Times, July 17, 1985, at C17, col. 1 (late ed.). See infra notes 121-26 and accompanying text. 3. Cristallina S.A. v. Christie, Manson & Woods Int'l, 117 A.D.2d 284, 502 N.Y.S.2d 165 (1986); McGill, Sweeping Reassessment in the Auction Trade, N.Y. Times, July 31, 1985, at Al, col. 4 (late ed:) [hereinafter McGill, Reassessment]; Christie's Chairman Quits London Posts Over Lies on Sales, Wall St. J., July 22, 1985, at 2, col. 5; McGill, Christie's Chairman WILLIAM AND MARY LAW REVIEW [Vol. 29:501 partment of Consumer Affairs, the chairman of Christie's New York and London operations resigned his position and surrendered his auction license for two years. The Department of Consumer Af- fairs fined Christie's $80,000 and suspended the auction license of the president of the New York branch for four months because he had known of and perhaps assisted in the misrepresentation. 4 Fi- nally, these and other recent controversies prompted the Depart- ment to undertake a thorough review of auction house practices with the goal of revising and strengthening the city's regulation of the art market.' These cases are but two recent examples that demonstrate that the art world is far from immune to the problems of deception and misrepresentation that characterize many commercial transactions in our society today." These practices range from the artist who intentionally misrepresents a modern work as that of an old master 7 to the dealer who, either intentionally or unintentionally, Quits in False Sale Case, N.Y. Times, July 20, 1985, at 1, col. 1 (late ed.) [hereinafter Mc- Gill, False Sale Case]. See infra notes 148-73 and accompanying text. 4. CristallinaS.A., 117 A.D.2d at 295-96, 502 N.Y.S.2d at 173; Christie'sChairman Quits London Posts Over Lies on Sales, supra note 3. 5. McGill, Reassessment, supra note 3. As a result of this review, in April 1987 the New York City Department of Consumer Affairs announced new regulations primarily concerning auction house practices with respect to setting and implementing reserve prices and identi- fying auction items in which the dealer has an interest. CITY OF NE w YORK ADMIN. CODE tit. 20, ch. 2, sub ch. 13 (1987). Burnham, As the Stakes in the Art World Rise, So Do Laws and Lawsuits, N.Y. Times, Feb. 15, 1987, § 2 (Arts and Leisure), at 1, col. 2 (late ed.). 6. A discussion of the importance, even to the financial world, of the art market, which boomed during the 1970s, may be found in 2 J. MERRYMAN & A. ELSEN, LAW, ETHICS AND THE VIsuAL ARTS 478-83 (2d ed. 1987). Although the art market slumped during the early 1980s, it has soared again since 1984, spurred by the bull market on Wall Street and investors seeking new investments for their profits. Purchasers reportedly have paid at least double the highest pre-auction estimates, and both Sotheby's and Christie's posted record sales and profits in the 1984-1985 auction season. Benway, Full of Bull? When Wall Street Prospers, Art Thrives, Barron's, June 23, 1986, at 8, col. 1. In the 1985-1986 season, Sotheby's re- ported worldwide sales of nearly $700 million, and Christie's sales for the same year were $536.8 million. At the same time, income from others involved in the art market was esti- mated at $6 billion to $7 billion. Burnham, supra note 5, at 28, col. 3. Whether the art market will suffer as a result of the 1987 stock market crash remains to be seen. If this happens, however, such a decline likely will cause even more lawsuits by investors disap- pointed because their art works did not retain their value. 7. The practice of copying old works or attempting to recreate the style of an older period and then passing these off as originals goes back even to ancient times. See S. ARNAU, THE ART OF THE FAKER THRETHOUSAND YEARS OF DECEPTION (1961); J. MERRYMAN & A. ELSEN, supra note 6, at 551-62; S. SCHULLER, FORGERIES, DEALERS, EXPERTS (1960); 1988] REGULATION OF THE ART MARKET misattributes a work and thereby concludes a more profitable sale.8 The owner of an art work who attempts to sell through an interme- diary, as well as the prospective purchaser of such a work, is placed in a market industry that operates under a set of highly technical and somewhat arcane rules, and which is largely untouched by gov- ernmental interference or regulation. This Article explores whether such owners and purchasers receive adequate legal protection and, if not, whether a unifying legal theory can be proposed to provide better protection for both owners and purchasers of art works. Examples of possibly abusive practices and the scientific, stylis- tic, and analytical techniques by which such abuses are detected T. WURTENBURGER, ASPECTS OF ART FORGERY (1962); Hodes, "Fake" Art and the Law, 27 FED. B.J. 73 (1967). 8. Such misattribution presents a complicated legal issue because correct attribution is often virtually impossible if the artist is no longer living and so cannot verify the work in person. The older the work of art, the more technical and less certain the process of identifi- cation often becomes. When dealing with antiquities, two particular additional problems arise. First, an object may be genuinely "ancient" and yet be misdated by several hundred years. To what extent does this constitute a misattribution, and does this standard vary depending on the pur- chaser's sophistication and status as an expert? For example, pottery of the Near East is often misattributed to the Iron Age (ca. 1000-600 B.C.) when it is in fact Roman or early Byzantine (ca. 100-600 A.D.). To the lay collector, this discrepancy may make little differ- ence, but to the expert it can be very significant. On the other hand, the expert should be aware of the likelihood of misattribution and therefore may not have reasonably relied on the dealer's representation. This problem is further exacerbated by the frequent inability of experts and scholars to agree on the authenticity and sometimes the date of ancient objects, as exemplified by the controversy surrounding the authenticity of a kouros (statue of a na- ked youth) attributed to the sixth century B.C. and acquired by the J. Paul Getty Museum for a reported $7 million. Russell, Disputed Greek Statue To Go on Exhibition, N.Y. Times, Aug. 12, 1986, at Al, col. 2 (late ed.). The Metropolitan Museum of Art had to remove from exhibition an Egyptian sculpture of a cat, which had been on display for nearly 25 years, because it may be a forgery. McGill, Met Says Its Popular Cat Is Probably Fake, N.Y.